PS: What are the most prominent changes you have observed ever since Covid has hit?
Devender: The biggest change that has happened to business due to Covid is that the customers with whom you can work with has been severely hit. Before the virus came we were working with 80 customers, but now not more than 30 are viable for us because of payment issues, financial challenges, lockdown, etc.
Secondly, market has changed completely as it is rapidly becoming online oriented. On the other hand discounts are at peak because everyone wants to get rid of inventories. New orders have started to come in but to reduce the gaps which happened during lockdown when some suppliers was not able to deliver or the order was stuck due to payment issues.
PS: What changes are happening on the manufacturing side?
Devender: Consolidation will happen in a big way on the manufacturing side. For instance, if we were working with ten suppliers we will work with only six now. Unfortunately, the pie of business is shrinking. The three months when lockdown happened created a big gap. While one side we cannot say that customers’ are at the fault as in many cases there was loss of production. Most of the factories are stuck with payment cycles in which payments will come in the next six to eight months.
“Unfortunately this pandemic is going to change the business forever. The first thing is that people who are not supposed to be in the business or were hanging by a thread will wipe away. Everybody is in the same boat not only in India but all over the world. “
PS: When do you see business coming back on track?
Devender: I do not think it will get over by the end of 2022. 2020 is already half pass and we can expect some rise by 2021 but the level/scale of business will not be the same. Inherently in garment business 30% of the product never gets sold so we have an excess inventory always. Since the market is shrinking, consumer is spending carefully, retail stores are shrinking or shutting down, jobs are being lost so it will take long time for consumers to come back to the comfort zone where they can shop without guilt or pressure.
PS: What is the current scenario of retail sales?
Devender: Online sales are catching up and there is no doubt it will increase by 30% in the coming times. In fact, many companies could survive the storm because they had online presence. Most of the fashion retailers and chains have reported decline of sales by around 30% and that too up to March period so when the results for the next quarter or next months would come we will counter harsh realities. Though online shift is happening but it will not be able to compensate the amount of buying which was done for physical retail stores. There is a lot of disparity between the volumes for offline versus online. In online styles have to be more, but in offline both volumes and styles are important. Wishful thinking is gone and these are really, unpredictable times.
PS: So what will be the new normal?
Devender: I don’t think things will change too much. The first major change will be that relationships will fall apart and those who will survive this crisis will get stronger. Testing times will give a chance to both buyer and supplier to find ways to work together. A lot of brainstorming will go in terms of shrinking the lead time, new payment terms, sourcing diversification, designing or consolidation. I am not worried about the major changes because impact is already happening in terms of relations getting broken, bankruptcies, closures, but when dust settles and whoever will be remaining and will work with each other it will be more closely looped. Both buyers and vendors will have to protect each other and make the supply chain stronger once again.
“Digitalisation will become the key aspect as physical sampling will be replaced by virtual sampling.”
PS: How will things change in terms of products, lead times and production?
Devender: When supply chains get crispier other factors like efficiency, lead times, pricing automatically improves. In this scenario design services become more critical and offering a wide product range becomes critical. As said earlier online business will increase and instead of 20; 200 styles will be required to entice customer. Digitalisation will become the key aspect as physical sampling will be replaced by virtual sampling.
“Consolidation will happen in a big way on the manufacturing side. For instance, if we were working with ten suppliers we will work with only six now. Unfortunately, the pie of business is shrinking. The three months when lockdown happened created a big gap. While one side we cannot say that customers’ are at the fault as in many cases there was loss of production.”
PS: When it comes to India the way payment delays and cancellation was handled was different than competitors, your opinion on this?
Devender: India was never about a macro situation, we have been talking about it but I don’t think India was not even in the list. We have been never able to take up opportunities that came up. And a buyer who is sourcing does not look at the country per say but look at vendor’s capabilities, products and efficiency to be able to make product that is required.
Unfortunately this pandemic is going to change the business forever. The first thing is that people who are not supposed to be in the business or were hanging by a thread will wipe away. Everybody is in the same boat not only in India, but all over the world. Cancellation, delays in payments have not been same across the board.
PS: How are buyers planning the future business or orders?
Devender: The business of sourcing and buying will move towards a testing phase where the buyer will be having a platform where they can test the product and its success and if it works well then only large numbers of orders will be placed. The transition will be very fast and speed will be very crucial because no buyer would want delays in receiving goods which become redundant by the time they arrive or get stuck in lockdown like it happened earlier.
“The business of sourcing and buying will move towards a testing phase where the buyer will be having a platform where they can test the product and its success and if it works well then only large numbers of orders will be placed. The transition will be very fast and speed will be very crucial.”
PS: What major changes you see on the manufacturing side?
Devender: I see a shift in the manufacturing rates where it will be no more modular; the demand for more styles will go up and on the other suppliers will have to work on product lines that can be done on larger runs with shorter lead times and higher efficiency. These things are not new and have existed in the past also, but now they have to seriously followed survival is tough.
PS: So there is an opportunity even in the crisis?
Devender: This pandemic has affected everyone globally, same thing is happening across all sourcing hubs now that clearly means who is more ready/equipped as an exporter or country to take an advantage. For instance, if business moves out of China how will a buyer prioritize in regards to where to source from? This totally depends on capability of an exporter or supplier. India can only win business by creating a confidence in customer that as an exporter we are much better than others in not only giving samples but also, executing them effortlessly and efficiently. India wins dramatically when it comes to sampling than any other country and we really made good samples, but when we get into execution we fail. That is why India is losing business. Indian suppliers have to work on transforming samples into quick test orders and then later into bulk orders.
PS: Does the sentiments against China going to bring business to India or other countries?
Devender: Movement of business from China already started when the US and China got into the trade war. In fact, companies were already gearing up on how to move sourcing away from China to other countries. They have already moved 40 to 45% business away from China and now they have only 12% left. Buyers’ have not taken this decision post Covid because they do not create strategy on the basis of virus coming from China. They do business on the basis of deliverables they get while sourcing and wherever they get those deliverables they will move.
PS: How as a buying company you are strategizing your sourcing?
Devender: I do not think we are talking about fallout like bankruptcies of payment now we are talking about relationship building . The whole chain has to align a new confidence. Buyers and buying offices already know the suppliers they still want to work with and who will no longer be in the list.
Since volume of business has declined one has to allocate 50% less business and prioritize accordingly. Another challenge is the moment you push customer to buy more you are inviting financial trouble. If it needs to be avoided you would rather work with customer who says I want to buy something which might working terms of profit, shorter lead times and innovation. Having capacity or more machines does not matter anymore as shorter quantities, more styles and casual categories will be vogue.
PS: What according to you a manufacturer should do in the situation?
Devender: The future is bright for those who will bring innovation at right price and right time as this is going protect them a lot in terms of payment terms, negotiatation and quality of buyers as well. You can only command when you have something different to offer.
“Online sales are catching up and there is no doubt it will increase by 30% in the coming times. In fact, many companies could survive the storm because they had online presence.”
The question is how one will differentiate to which my answer will be unique in terms of performance like go for digital sampling, speed to test or test and react. Do a self- introspection and think of these innovations more than spending money. I see a big management style change happening. We have to understand there is no tomorrow everything has to be ceased today. Whoever is going to bring that solution to the table will have desirability from buyer to work.
“Having capacity or more machines does not matter anymore as shorter quantities, more styles and casual categories will be vogue.”
PS:What product categories you see inviting growth?
Devender: The trend is towards work from home so anything that is related to it is workable. Every category is trending because of that. Fabrics, finishes, antimicrobial fabrics all will become a permanent thing, it is like a feature that has to be imbibed always. Home textile, furniture, anything that is related to home will gain growth.
India will have to come up with such fabrics with antimicrobial properties. We are hearing that mills are working in a way that any fabric can be made antimicrobial.These are kind of trend changes and embracing those changes is always helpful so whoever who is taking a lead on such compliance will have an edge in business.